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New guidance on unfair contract terms in tenancy agreements

169/05    7 September 2005

New guidance on how the Unfair Terms in Consumer Contracts Regulations apply to tenancy contracts has been issued by the OFT to help landlords provide clear and fair contract terms to their tenants.

Download Guidance on unfair terms in tenancy agreements (pdf 542 kb)

The OFT receives more than 200 complaints every year about unfair terms in standard tenancy contracts, such as financial penalties, exclusions of the landlord's liability for repairs and unfair termination and eviction clauses.

The guidance on standard tenancy contracts is a revision of guidance published in 2001 updated to reflect enforcement action taken by the OFT (see note 3), court judgments (see note 4), and recent experience in dealing with tenancy contract complaints.

The guidance outlines why some standard contract terms used in tenancy agreements are considered to be potentially unfair and includes examples of terms considered to be unfair and possible ways of revising them. Examples of unfair terms include those that:

• exclude or limit the landlord's liability, for example by transferring the landlord's legal obligations to the tenant
• impose potentially excessive penalties on tenants for failure to meet the terms of the contract e.g. by charging excessive rates of interest on late payments of rent
• enable the landlord to vary the terms of the contract, to impose new rules on the tenant or increase the rent at short notice.

The guidance also refers to tenancy agreements used by public sector and social housing providers, including local authorities, following a ruling by the High Court and Court of Appeal that the UTCCRs apply to terms in agreements used by these providers (see note 4 and press release 133/03).

A consumer leaflet, 'Unfair tenancy terms - don't get caught out', which gives a brief overview of the OFT's views on unfair terms in tenancy agreements, is also available.

Download the consumer leaflet (pdf 187 kb)

Sir John Vickers, OFT Chairman, said:

'Rented accommodation provides homes for millions of people in the UK. It is important that tenants have clear and fair contract terms so they know what the rights and obligations of the lease are. The OFT will continue to take action against landlords who remove tenants' rights through using unfair terms.'

The OFT's Annual Plan for 2005-06 identifies the construction and housing markets, including the markets for related services, as a priority theme for OFT action. 

The guidance is available from the publications/reports/unfair contract terms area of the site, the consumer leafelt is available from the publications/consumer leaflets/general consumer rights area of the site.

NOTES

1. This guidance supersedes earlier OFT guidance on unfair terms in tenancy agreements issued in 2001.

2. The Unfair Terms in Consumer Contracts Regulations (UTCCRs) came into force in 1999 (superseding the UTCCRs 1994) and apply to standard contract terms used with consumers in contracts made after 1 July 1995. The UTCCRs protect consumers against unfair standard terms in contracts they make with suppliers.

The OFT, together with trading standards and certain other bodies, can take legal action to prevent the use of potentially unfair terms. A term is unfair if it causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of consumers. Standard terms may be drafted to protect commercial needs but must also take account of the interests and rights of consumers by going no further than is necessary to protect those legitimate commercial interests. An unfair term in a contract covered by the UTCCRs is not binding on the consumer. Ultimately, only a court can decide whether a term is unfair.

3. For example in 2005 the OFT obtained undertakings from two large property companies the William Pears Group and Bankway Properties (see press release 105/05) that they would amend their contract terms to comply with the UTCCRs.

4.  The ruling in question came in a judicial review brought by tenants of Newham Council regarding the council's placement policy on housing homeless people and the contract terms used in providing them with accommodation. The OFT acted as an interested party in the case, dealing only with the question of the applicability of the Regulations.

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